Calcutta High Court (Appellete Side)
Sekhar Sharma vs State Of West Bengal And Anr on 4 April, 2025
IN THE HIGH COURT AT CALCUTTA
CRIMINAL REVISIONAL JURISDICTION
APPELLATE SIDE
Present:-
HON'BLE JUSTICE CHAITALI CHATTERJEE DAS.
CRR 818 of 2015
SEKHAR SHARMA
Vs.
STATE OF WEST BENGAL AND ANR.
For the Petitioner : Mr. Ayan Bhattacharjee, Sr. Adv.
Mr. Arpit Choudhury, Adv.
Mr. Anil Choudhury, Adv.
For the State : Mr. Imran Ali, Adv.
Ms. Debjani Sahu, Adv.
Last Heard on : 19.03.2025
Judgement on : 04.04.2025
CHAITALI CHATTERJEE DAS, J. :-
1. This is an application under Section 482 of CRPC for quashing of the
proceeding being G.R case No. 35 of 2012 arising out of Hare Street P.S
case No. 6 dated January 2, 2012 under section 420 of the Indian Penal
Code, 1860 pending before the Court of the learned Chief Metropolitan
Magistrate at Calcutta.
Fact of the case
2. Briefly stated, the Case of the petitioner/accused is that Calcutta Chroma
Type Private Ltd. a company duly incorporated under the Company having
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its registered office at 76/2, Christopher Road, Kolkata 700046, running
since 1933. The petitioner is the Managing Director of the said company.
The company was in need of paper of a particular size and weight which
was not regularly manufactured by any paper mill and was not therefore
available freely in the local market.
3. The Opposite Party no.2 KCT Trading Private Limited was dealing in the
business of selling papers in the market since long and earned a good
repute in the market. The management of Opposite Party no. 2 had
approached the Chroma Type Company sometime in July, 2018 for supply
of such paper. It was made clear to the Opposite Party no. 2 by the
petitioner that the regularity in supply to be paramount since there exists
stiff competition in the printing industry, and therefore, the company
relied on bulk business. The Opposite Party no.2 accepted such proposal
and the company had made payments to the Opposite Party no. 2, every
month from October 2010.
4. In April 2011, the company asked the Opposite Party no. 2 for credit notes
to settle their accounts vide an email dated 21 April 2011, but the Opposite
Party no.2 did not correspond with the petitioner. The petitioner duly
informed Mr. Dipanjan Bhattacharya and Mr. Ashok Tandon of the Opposite
Party, no.2 /company, about the regular delays and shortages in supply of
monthly order on a daily basis over phone, through emails on various dates.
During the eight month period from September 2010 to April 2011, the
Opposite Party no.2 was to supply 1600 reams of special size paper but only
594; Rims of paper were supplied, resulting in a shortfall of 1006 rims. The
huge shortfall had to be made up by the company by purchasing standard
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size paper from paper market locally at much higher rates causing huge
losses to the petitioner company. Despite informing the Opposite Party, no.2
about the huge losses faced by the company on account of the regular delay
on the part of the Opposite Party no.2 only assurances were given to improve
their supply, quality and quantity wise. Ultimately, the petitioner company
stopped doing business with the Opposite Party no. 2 sometime in April
2011.
5. It is the further case of the petitioner that in or around September, 2013,
the petitioner came to learn that he was wanted in connection with the above
mentioned criminal case when the police authority informed about the First
Information Report registered against him pursuant to the order dated
December 12, 2011 passed by the court of the learned Chief Metropolitan
Magistrate at Calcutta. The investigating agency also filed charge sheet
under Section 420 of the Indian Penal Code, against the petitioner.
6. Being aggrieved by and dissatisfied with the impugned proceedings of GR
case number 35 of 2012 arising out of Hare Street Police Station case no.6
dated January 2, 2012, this revisional application has been filed for
quashing such proceeding.
Submissions
7. The learned Senior advocate appearing on behalf of the petitioner would
submit that the allegations levelled in the first information report suffer from
antagonistic contradictions and inherent absurdity. The essential ingredients
to attract this provision under Section 420 IPC are absolutely missing and
the distinction between a breach of contract and offence of cheating being
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the intention of the accused at the time of inducement is absolutely missing.
A breach of contract cannot give rise to criminal prosecution for cheating
unless fraudulent dishonest intention is show at the beginning of the
transaction. It is further argued that the offence alleged in the instant case
filed by the Opposite Party no.2 under Section 406 and 420 of the Indian
Penal Code, where under no specific liability is imposed on the officers of the
company and in absence of specific details about the same; no person other
than the company can be prosecuted. It is submitted that the instant
proceeding as initiated against the present petitioner is absolutely baseless,
frivolous, and displace a clear misuse of the provisions of criminal law and
fails to disclose any commission of offence by the petitioner. More so the
attempt has been made by the opposite party number 2 to give a colour of
criminal proceeding, which is absolutely a civil dispute and could, have been
filed by the Opposite Party no. 2, at least against the petitioner for recovery
of the amount paid to the company of the petitioner. It is further argued that
the company against whom the allegation has been primarily levelled has not
been arraigned as an accused which is mandatory and on that score itself
the proceeding should be quashed .Furthermore the Learned Magistrate
ought not to have forwarded the complaint to the Police Authorities for
investigation.
8. The learned Senior advocate cited decisions reported in (2024) SSC
online SC 171 (Lalit Chaturvedi, and others versus State of Uttar
Pradesh and other, where the clear distinction between a civil wrong in the
forum of breach of contract, non-payment of money, or disregard to
valuation of the contractual terms, and a criminal offence under Section 420
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and 406 of the Indian Penal Code has been shown. The learned advocate
further cited the following decisions;
(2007) 7SCC 373 (Vir Prakash Sharma versu Anil
Kumar Aggarwal,
(2024) 10 SCC 690, Delhi race club(1940) Ltd versus
state of UP,
(2019) 9 SSC 148(Satish Chandra Ratan Lal Shah
versus state of Gujarat),
2024 SCC online 9834 (Prem chand Jain and another
versus the state of West Bengal and another),
(2005) 10 SCC 336, Uma Shankar Gopalika v State of
Bihar and
(2015) 12 SCC 781 Sharad Kumar Sanghi v Sangita
Rane in support of his argument.
9. Per contra the case of the prosecution is that the proceeding before the
trial court started on the basis of an application under Section 156 (3) of the
Code of Criminal Procedure filed by the present Opposite Party no.2 KCT
trading Private Limited against the present petitioner. The contention of the
complainant is that the KCT trading Private Limited being a company duly
incorporated under the Companies Act, 1956 having at its registered office at
Tapper house, 25 Brabourne Road, Police Station Hare Street, Kolkata, used
to deal with business of selling papers of various types in the market since
long and earned a good repute in the market in the field. On being
approached by the company of which the present petitioner is the Managing
Director, for establishing a business relationship, the Opposite Party no. 2
agreed on specific terms that there would be a business on no credit basis.
The company further agreed to abide by the conditions of payment. The
present Opposite Party no.2 also agreed to supply materials to the accused
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as per his requirement on credit. The accused assured the complainant
about the payment within a short time by issuing cheque against the supply
and delivery of materials in question. Accordingly on and from 30 November
2010, till 22 March 2011, the said company sold, supplied and delivered
papers/reams to Calcutta Chroma Private Ltd. as per the requirement and
orders of the present petitioner, of an amount of ₹7,19,634 only. The
accused duly received the materials so delivered without raising any
objection and thereafter accepted the bills raised by the complainant against
such supply but later on when for a considerable period of time, no payment
came from the accused person against the supplies made, the complainant
started demanding money and then all a sudden the accused person started
raising his objection regarding the quality of papers. The specific case of the
complainant was that the accused and his company never raised objection
about the quality of the papers nor returned the material so supplied. The
complainant was convinced that the accused person tried to avoid making
any payment. They tried to contact with the accused person by sending its
representative to his office but found the office under lock and key. The
company complainant also came to know that the accused person has closed
its business and since May 2011, the complainant never been able to trace
out the accused as he avoided the representative of the complainant
company by not taking their calls or not meeting them. The complainant
after that went to lodge a complaint with the officer in charge of Hare street
Police Station, but he was advised to obtain an appropriate order from the
court for causing an investigation. Accordingly he had to file the application
under Section156 (3) of Code of Criminal Procedure. The court, vide order
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dated 28 December 2011, was pleased to send the complaint to the Hare
Street Police station for causing investigation.
10. The argument advanced by the learned advocate appearing on behalf of
the State respondent, supporting the case of the Opposite Party no.2
pertains to breach of trust ‘as the petitioner being the Managing Director of
the company agreed to make payment on receiving supply of the papers and
despite receiving the same failed to make any payment, which surfaces out
mens rea under Section 420 of IPC. The Learned advocate would further
submit that the total amount due was Rs.7,19,634/-and the petitioner
though received the papers did not make any payment on the pretext that
the quality of the papers were not sufficient and not up to the mark.
11. The petitioner did not return the goods delivered nor made payment
which amounts to cheating and the petitioner with an intention to deceive
the Opposite Party No.2 did not reply the calls or avoided meeting with the
men and agent of the Opposite Party Company. So the Learned court rightly
directed the police authorities to investigate and the police authority after
complication of investigation filed the charge sheet which prima facie proves
the complainant’s case and therefore this revisional application suffers from
any cogent reason for which any interference is necessary.
Heard the submission of both the learned advocates.
Analysis
12. Having gone through the content of the complaint as well as the
argument advanced on behalf of the parties it is quite clear that pursuant to
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an agreement between the petitioner and Opposite Party No.2 a business
transaction started between them and accordingly some materials were
supplied but payment was not made despite repeated demand and the
supplied materials also never returned, which certainly amounts to breach of
contract. Whether such breach of contract can be termed as breach of trust
under Section 406 of IPC or cheating under Section 415 of IPC and thereby
liable to be punished under Section 420 IPC is to be dealt with by this court.
13. The Hon’ble Supreme Court in (2024) 10 SCC 690, Delhi Race Club
(1940) Ltd. versus state of UP referred the relevant paragraphs (9-10) of
the decision of the Hon’ble Supreme Court in S.W. Palanitkar versus
State of Bihar, (2002,) 1 SCC 241 observed that in order to constitute an
offence under 406 IPC The following ingredients are necessary;
1) there must be entrustment with person for property
or dominion over the property, and
2) The person entrusted;
a) dishonestly misappropriated or converted property
to his own use or
b) dishonest used or disposed of the property or
wilfully suffers any other person, so to do in violation
of:
i) Any direction of law prescribing the method in which
the trust is discharged;
Or
ii) Legal contract, touching the discharge of trust.
14. The Hon’ble Supreme Court further quoted the observation made by the
Hon’ble Court in (2009) 7 SCC 712 (Harmanpreet Singh Ahluwalia v.
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State of Punjab) observed that in respect of an offence under section 420
IPC, the essential ingredients are;
1) Deception of any person, either by making a false or
misleading representation, or by other action or by
omission.
2) Fraudulently or dishonestly inducing any person to deliver
any property.
3) The consent that any person shall return any property
and finally intentionally inducing that person to do or omit to
do anything, which he would not do or omit.
15. In the decision reported in (2020) 4 SSC online SC 171. (Lalit
Chaturvedi and others versus State of Uttar Pradesh and other) the
Hon’ble Supreme Court referred the paragraph 18 of the decision of
Mohammed Ibrahim versus State of Bihar (2009)8 SCC 751 where also,
discussed the ingredients which are to be satisfied in order to constitute
an offence under Section 420 of Indian Penal Code which includes
deception by making a false or misleading representation, or by dishonest
concealment or by any other action, omission, fraudulent, or dishonest
inducement of the person to either deliver any property or to consent to
the retention there of by any person or to intentionally induce that person
so deceived to do or to do anything, which he would not do or omit if he
were not so deceived and such an act or omission, causing or is likely to
cause damage or harm to that person in body, mind, reputation, or
property.
16. The case before the Hon’ble Supreme Court in Lalit Chaturvedi was
almost identical like the instant case in hand where the Respondent No.2
/complaint’s grievance pertained to failure of the appellant to pay the
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outstanding amount, in spite of the repeated demands. The Respondent
Number 2/complainant claimed that the supplies were made, between the
period first December 2015, and 6 August 2017. The Appellant had made
the payments from time to time of ₹3,76,40553./-leaving a balance of
₹1,92,91,358/-. The Hon’ble Supreme Court observed that ‘we will assume
that the assertions made in the complaint are correct, but even then a
criminal offence under Section 420 with Section 415 of the IPC is not
established in the absence of deception by making false and misleading
representation, dishonest, concealment, or any other factor, omission, or
inducement of the complainant to deliver any property at the time of the
contracts being entered. The ingredients to allege the offence are neither
stated nor can be inferred from the averment. A prayer is made to the police
for recovery of money from the appellant. The police is to investigate the
allegations which disclose a criminal act. The police does not have the
power and authority to recover money or act as a civil court for recovery of
money’.
17. In the decisions relied upon by the learned Senior advocate of the
petitioner reported in (2005)10 Supreme Court cases 261. (Hotline Tele
Tubes and Components Ltd v State of Bihar and another) the Hon’ble
Court dealt with the matter where in the complaint there was no whisper
that at the very Inception of the contract between the parties, there was
any intention to cheat. The Hon’ble Apex court therefore observed that the
case was of a civil liability without disclosing any criminal offences; much
less offences either Section 406 or 420 IPC. The prayer of the petitioner
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was allowed after setting aside the order of the Hon’ble High Court, which
refused to quash the proceeding, considering that allowing such
prosecution to continue would amount to an abuse of the process of court
and to prevent the same, it would be just an expedient to quash the same.
18. In Satish Chandra Ratan Lal Shah versus State of Gujarat and
another (2019)9 SCC 148, the ingredients for constitution of offences of
criminal breach of trust and cheating were clarified. The case before the
Supreme Court was failure of Appellant / accused to repay the loan
borrowed from Respondent No.2, complainant .The trial court framed the
charges under Section 406, 420 and 417 of Indian Penal Code so the
petition was filed for quashing which was rejected by the High Court.
Taking note of the case of Gyan Singh versus State of Punjab the
Hon’ble Court observed that in a number of cases, the Apex court has
usually cautioned against criminalising civil disputes, such as breach of
contractual obligations when the legislature intended to criminalise only
those branches which are accompanied by fraudulent, dishonest, or
deceptive inducements, which resulted in involuntary and inefficient
transfers under Section 415 IPC. The Hon’ble Supreme Court was pleased
to reverse the order of dismissal of the quashing application by the
Hon’ble High Court and the said prayer made under section 482 Cr.PC
was allowed and the criminal proceeding instituted was quashed.
19. The learned Senior advocate further relied upon the decision of
Hon’ble High Court of Calcutta passed by Justice Ajay Kumar Gupta
reported in 2024 SCC online 9834 in (Prem Chand Jain and another
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versus State of West Bengal and another) where the Hon’ble Single
Judge referred the case of Delhi race club (1940) Ltd versus State of UP
(supra) and also the case of Lalit Chaturvedi versus State of Uttar of
U.P (supra) and accordingly came to the finding that the ingredients of the
offences alleged by the Opposite Party number two in the complaint to
attract Section 406/ 420/120B of Indian Penal Code, were totally missing.
Merely because payment has not been made or accounts have not been
settled, never constitute offence punishable under the above sections more
so the dispute between the parties are purely civil in nature and criminal
proceeding should not be allowed to be continued any further otherwise it
would be sheer abuse of the process of law.
20. In Uma Shankar Gopal versus State of Bihar and another
Hon’ble Supreme Court (supra) while examining as to whether on the
facts disclosed in the petition of complaint, any criminal offence
whatsoever was made out much less offences under Section 420/120 BC,
it was observed that ‘it is well settled that every breach of contract would
not give rise to an offence of cheating and only in those cases, breach of
contract would amount to cheating where there was any deception played
at the very inception. If the intention to cheat has developed later on, the
same cannot amount to cheating.”
21. Similarly as discussed in Delhi Race Club (1940) Ltd. vs State of
U.P (supra) the observation made ‘there must be some entrustment of
property to the accused wherein the ownership is not transferred. In case of
sale of movable property, although the payment may be deferred yet the
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property in the goods passes on delivery as per Section 20 and 24
respectively of the Sale of Goods Act, 1930 .Once the property in the goods
passes to the purchaser. It cannot be said that the purchaser was entrusted
with the property of the seller. Without entrustment of property there cannot
be any criminal breach of trust, for failure to pay the consideration amount
in case of sale of goods is flawed to the core’
22. In the decision as relied u[on by the learned advocate of the petitioner
while discussing the scope of enquiry by a Magistrate under section 202 it
was observed in paragraph 12 and 13 are as follows;-
12. ‘It is by now well-settled that at the stage of issuing
process it is not the duty of the court to find out as to whether
the accused will be ultimately convicted or acquitted. The
object of consideration of the merits of the case at this stage
could only be to determine whether there are sufficient
grounds for proceeding further or not. Mere existence of some
grounds which would be material in deciding whether the
accused should be convicted or acquitted does not generally
indicate that the case must necessarily fail. On the other hand,
such grounds may indicate the need for proceeding further in
order to discover the truth after a full and proper investigation’.
13. ‘If, however, a bare perusal of a complaint or the evidence
led in support of it shows essential ingredients of the offences
alleged are absent or that the dispute is only of a civil nature
or that there are such patent absurdities in evidence produced
that it would be a waste of time to proceed further, then of
course, the complaint is liable to be dismissed at that stage
only’.
It was further observed in paragraph 24 of the said judgement that
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24. ‘Where a jurisdiction is exercised on a complaint petition
filed in terms of Section 156 (3) or Section 200 CrPC, the
Magistrate is required to apply his mind. The Penal Code
does not contain any provision for attaching vicarious liability
on the part of the Appellants 2 and 3, respectively, herein
who are none other than office-bearers of Appellant 1
Company. when appellant 1 is the Company and it is alleged
that the company has committed the offence then
There is no question of attributing vicarious liability to the
office-bearers of the Company so far as the offence of
cheating or criminal breach of trust is concerned. The office-
bearers could be arrayed as accused only if direct allegations
are levelled against them. In other Words, the complainant
has to demonstrate that he has been cheated on account of
criminal breach of trust or cheating or deception practised by
the office-bearers.’
Therefore in the given case also while forwarding the complaint the
Magistrate failed to apply his mind as to whether prima facie materials
exits for forwarding the complaint for further investigation
23. Therefore in view of the slew of judgements of the Hon’ble Supreme
Court as well as, of different Hon’ble High Courts there remain hardly any
scope to initiate a criminal proceeding under Section 420 or 406 IPC for
breach of contract or default in repayment of money against any material
received and the complaint must go before the civil court for legal remedy.
24. Section 420 IPC reads as;
Cheating and dishonest inducing the property- whoever cheats and thereby
dishonestly induces the person deceived to deliver any property to any
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person, or to make, alter, or destroy the whole, or any part of a valuable
security, or anything which is signed or sealed, and which is capable of
being converted into a valuable security, shall be punished with
imprisonment of either description for a term which may extend to 7
years, and shall also be liable to fine.
25. The Latin term mens rea means “guilty mind “which is an fundamental
principles of criminal law and essential elements of criminal
Jurisprudence . It comes from the legal maxim ,actus non facit reum nisi
means sit rea ” which means “the act is not guilty unless the mind is
guilty. Therefore for commission of offence of cheating the dishonest
intention or the intention to defraud must be shown from the very
beginning of the transaction and that is mens rea which is to be proved.
26. In the instant case, the admitted fact appears to be of existence of a
business relation between the parties who in agreement with the terms
and conditions entered into the business transaction. The complainant
company was to deliver the required materials of certain specifications,
and the petitioner was to pay the amount in lieu of that. The said
transaction started on and from September 2010 and continued till March
2011. It is not the case of the complainant that since the inception of their
business transaction, there was any deception on the part of the petitioner
or his company, and any inducement done, fraudulently or dishonestly to
deliver any property. No allegation was also made that accused company
had an intention to cheat the Opposite Party No.2 from the very inception.
The complaint was lodged on the basis of the subsequent events when the
Page 15 of 18
petitioner company did not pay the amount after receiving the required
materials. The present petition the petitioner has made out his own case
about non-fulfilment of the agreed quality and standard of the material by
the opposite party, No.2, which resulted in huge losses to the company as
they had to purchase the materials from the local market at the much
higher rate. Therefore from the entire facts and circumstances it is evident
that the dispute can be addressed before the civil court and no case has
been made out to attract 420 IPC.
27. The second limb of argument of the petitioner is despite raising
allegation against the Calcutta Chroma Company the company has not
been arraigned as an accused in the petition of complaint and on that
score also the criminal case initiated on the strength of the complaint
should be quashed. On this point the learned advocate cited one decision
of Hon’ble Supreme Court reported in (2015) 12 SCC 781 ( Sharad
Kumar Sanghi v Sangita Rane ) where the complaint was lodged against
the Managing Director of the company for suppression of information
regarding the vehicle purchased from the Automobile company and lodged
complaint for cheating. The Hon’ble court referring the case of Aneetav
Hada vs Godfather Travels and Tours (P) Ltd (2012) 5 SCC 661 held
that in absence of any specific allegations against the Managing Director
where the company has not been arrayed as an accused ,no proceedings
can be initiated against it where vicarious liability is fastened under certain
statutes . In the given case the company has not arrayed as an accused
when the petitioner being the Managing Director has been made an accused
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and obviously the transaction was between the two companies and specific
allegations were directed against the company.
Conclusion
28. Be that as it may in view of the catena of decisions of the Hon’ble
Supreme Court, mere breach of promise or agreement or contract does not
ipso facto constitute offence of cheating for sustaining the charges.
Existence of fraudulent or dishonest intention right at the beginning of the
transaction with mens rea must be shown. The Opposite Party number
two could have file the appropriate proceeding before the civil court for
recovery of money against the company of the petitioner.
29. Therefore, in the light of above discussions no such ingredients can be
found from the four corner of the petition of complaint to attract either
Section 420 IPC against the petitioner and furthermore the company has
not been arrayed as an accused despite putting allegations against the
company and hence the criminal proceeding is liable to be quashed.
30. Thus the instant Ciminal Revisional application being CRR No. 818 of
2015 is allowed. Connected applications if any are also disposed of .The
entire proceeding being G.R Case No. 35 of 2012 arising out of Hare Street
P.S Case No. 6 dated January 2,2012 under section 420IPC is hereby
quashed .
31. Case Diary if any be returned to the Learned Advocate for the State .
32. Let a copy of this Judgement be sent to the Learned court of Chief
Metropolitan Magistrate at Calcutta .
33. No order of costs.
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34. Urgent certified copy of the Judgement if applied for be given to the
parties on priority basis.
(CHAITALI CHATTERJEE DAS, J.)
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